Alex
It’s fairly simple and not as daunting as it sounds. Plenty of people have to do it, expecially those in the highest tax bracket (where you should be submitting a return for any benefits in kind or even to pay additional tax on savongs (which are typically only taxed at the lower rate of 22% by banks).
First thing you will need to do is register with the HM Revenues and Customs for ‘Self Assessment’. If you give your local tax office a call and register they will send you a self assessment tax file number. (Often you will find your local tax office details on the back of your payslip).
You can then register to do your tax online via their website. On this form you will be able to declare your additional income less expenses and pay tax on the profit you make.
Details on Self Assessment can be found here: xhttp://www.hmrc.gov.uk/individuals/tmaself-assessment.shtml
You have just missed the filing return for the tax year ended April 2007. For the financial year April to April 2008 you should aim to submit your return by the end of September but could get it in by the 31st January 2009 at the latest. The online process is far better than the paper based forms (which are detailed and confusing). When doing it online it calculates the tax for you.
Sometime in May your employer should give you a P60, which summarises your income for the year and the total tax paid. You will need this information when declaring additional income through the Self Assessment route.
As a precaution, they say you should put aside at least 25% of any revenue you are earning now to pay for future tax liabilities. This of course depends on your personal income status, but is a rough rule of thumb for earner’s below the highest tax bracket.
I hope this helps but PM me if you need any help.
Buddy